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Talking Anime Business Blues

If it seems like we’re a little anime-obsessed this week, well, it’s because we are. Two new (to us) series have captured our imagination, and it seems the news is feeding our obsessions by running lots of stories on the topic. Like the behind-the-scenes look at the anime industry that recently appeared inBusiness Week.

Industry insiders in both Japan and the United States are seeing the massive anime business as the next big Japanese export. From nighttime television to action figures, the potential for growth is explosive. But, we see, behind every explosion is the potential for implosion.

According to a Business Week source, roughly 99% of anime has never been seen outside of Japan, and those shows which are successfully exported don’t necessarily translate to big money for this labor-intensive art. While certain series are finding international audiences through the magic of anime-obsessed Internet fans who are willing to spend time and energy creating fan-subs (subtitling the works in their native languages), this method of distribution doesn’t provide much of a revenue stream. It does, however, create the buzz needed for a successful launch in the international television market as discussed in a recentWired article:

As noted by Japanese entrepreneur Joi Ito, fans of the Japanese anime series Naruto regularly post translated episodes of the show to BitTorrent, which attracts more fans to the series.

The relatively obscure program has spawned a global following in online forums, internet relay chat channels and fan sites.

With box sets and special edition DVDs, Ito wrote, the copyright holders can make a tidy sum from fans prepared to “spend thousands of dollars on one show.”

Scott, of Scott’s Anime Almanac doesn’t quite buy into Ito’s vision, and while we do buy legal copies of shows we’ve discovered via fan-subs, Scott’s belief may be more widespread than we’d like to believe:

Make no mistakes about it, fansubs are killing the anime market for the US. If you don’t believe me, think about just how many anime DVDs have you purchased recently compared to the number of shows you’ve downloaded for free. I for one will admit I haven’t bought any of the shows I’ve watched fansubbed yet. Now I would like to think that the reason for this is because none of them have been released yet, and when DearS and Girls Bravo come out this summer I’m going to buy them. But since that hasn’t happened yet, I can’t really claim I will really do so. Sometimes I begin to doubt that I will.

Fans like Scott are in a rough place. Until the Japanese industry ramps up its sales to international markets, the underground distribution method will remain. This is compounded by the fact that commercial interests aren’t necessarily driving the business. Anime studios remain largely small-scale operations, and the artists who hand-draw the cells aren’t necessarily savvy business people. Hmm, this sounds like another artist-driven industry.

Just as problematic is a widespread lack of business savvy. While toymakers and TV broadcasters have made billions from marketing anime characters, most studios are run by artists who rose through the ranks of animators but have little experience in management. That has often led to a focus on production over profits and a failure to make money even with successes. Until recently almost all anime studios simply sold their programs to TV companies for a one-off fee, giving up any claim to further revenues from their creations.

As the industry struggles to find its business footing, talent issues are arising. The number of artists who draw anime are decreasing, and companies are starting to outsource work to South Korea (this isn’t a Japan-only phenomenon; U.S. animation studios have been doing this for a while, most notably with The Simpsons). This could get interesting as Korea’s own animation industry grows.

There are some signs of change. Yumeta pays rookie animators a minimum of $1,150 a month plus benefits, and salaries are increased substantially after a year. Production I.G., meanwhile, says it no longer relies on workers from overseas. And the company has reformed its salary system, now rewarding animators based on the popularity of their work. This means that a handful of top animators are now making as much as $180,000 a year. “Of course, it raises production costs, but I.G.’s strength is our people,” says CEO Mitsuhisa Ishikawa. “If you invest in people, they’ll pay you back with high-quality animation.”